Introduction to Entrepreneurship - Sample Assignment
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See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/301659818Introduction to EntrepreneurshipChapter · March 2015CITATIONS3READS385,4121 author:Some of the authors of this publication are also working on these related projects:Impact of SHGs on Social, Economic and Political Empowerment of Women: A Case of Ghaziabad DistrictView projectDr. Anurag Pahuja49PUBLICATIONS88CITATIONSSEE PROFILEAll content following this page was uploaded by Dr. Anurag Pahuja on 27 April 2016.The user has requested enhancement of the downloaded file.
Introduction to Entrepreneurship Anurag Pahuja Associate Professor IMS, Ghaziabad Rinku Sanjeev Associate Professor IMS, Ghaziabad
Chapter 1: Introduction to Entrepreneurship 1.1 Objectives 1.2 Introduction 1.3 Development of the Concept of Entrepreneurship 1.4 Current Scenario of Entrepreneurship in India1.5 Entrepreneur and Entrepreneurship: Conceptual Framework 1.6 The Intrapreneur (Corporate Entrepreneur) 1.7 Entrepreneurial Decision making process 1.8 Types of Start ups 1.9 Ethics and Social responsibility for Entrepreneurs 1.10 Role of Entrepreneurs in Economic Development 1.11 Chapter Summary 1.12 Key Terms 1.13 Discussion Questions & Exercises 1.14 References 1.1 Objectives After going through this Chapter, the readers will be able to- Know the historical landmarks in the development of the concept of Entrepreneurship Know about the current scenario of Entrepreneurship in India Understand the concepts of Entrepreneur and Entrepreneurship Understand the characteristics, functions and various types of Entrepreneurs Understand the concept of Corporate Entrepreneur (Intrapreneur) Understand various types of Entrepreneurial start-ups Identify the role of ethics and social responsibility for Entrepreneurs
Comprehend various steps involved in the Entrepreneurial Decision making process Know the role of Entrepreneurs in the economic development of a country 1.2 Introduction With the advent and swift developments in field of technology and the forces of globalization, world has become a global village, characterized by an explosive growth in international business and competition. Being a part of the global economy is posing innumerable and substantial challenges for organizations and industries throughout the world. On the one hand, to survive, keep pace with speed of advancements and lead in the challenging world is hard, at the same time, this opens up various new and unexplored doors of opportunities. Entrepreneurship, which is one the most powerful economic force known to humankind, is empowering individuals to seek opportunity where others find intractable problems. Entrepreneurship is the symbol of business tenacity and achievement; it is a vital source of change in all facets of society. Entrepreneurs, with their inherent intelligence, drive and hard work, have made best use of the opportunities available to them. They have historically altered the direction of national economies, industries, or markets. They have invented new products, developed organizations, and pioneered outburst in new technologies. They have forced the relocation of resources away from existing users to new and more productive users. Many entrepreneurial innovations have transformed the society, in which we live and enjoy the outcomes. 1.3 Development of the Concept of Entrepreneurship The term entrepreneur, in French, if literally translated, means “go-between” and has been used since the 12thCentury. An earliest example of an entrepreneur as go-between is Marco Polo, who attempted to establish trade routes to Far East. As a go –between, Marco Polo would sign a common contract with a capital provider (capitalist) to sell his goods, which provided loan to the merchant–adventurer at a high interest rate, including insurance. The capitalist, being the passive risk bearer, and the merchant, bearing the physical and emotional risk used to trade the goods. After the merchant completely sold off the good, the profits were divided between both with capitalist taking around 70-75 percent, while the merchant- adventurer getting the remaining 25-30 percent. In the Middle ages, the feudal system dominating in Europe hampered the development of and entrepreneurship.
During seventeenth century, the term entrepreneur was used for a person who entered into a contractual arrangement with the government to perform a services or supply stipulated products since the contract price was fixed , any resulting profits or losses belonged to the entrepreneurs, thereby assuming the risk arising out of his expedition. Richard Cantillon, a noted French economist during 17thcentury, developed one the early theories of entrepreneur and is credited as the founder of the term. He viewed the entrepreneur as a risk taker, observing the discrepancies between supply and demand and options for buying cheaply and selling at a higher price. He defined an entrepreneur as a merchant or farmer “who buys at certain price and sells at an uncertain price, and bears the operating risk”. By the eighteenth century feudalism was eliminated and legal and institutional conditions had changed with the emergence of the joint stock company. During this period, the person with capital was differentiated from the one who needed capital. In other words, entrepreneur was distinguished from the capital provider. One of the reasons for this differentiation was the industrialization occurring throughout the world. Many of the inventions developed during this time were reactions to the changing world. It was only during nineteenth century, entrepreneurs were viewed from an economic perspective. The entrepreneur organizes and operates enterprise for personal gain. He pays current prices for the materials consumed in the business, for the use of land, for personal services he employs and for the capital he requires. He contributes his own initiative, skills and ingenuity in planning, organizing, and administering the enterprises. He also assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances. The net residue of the annual receipts of the enterprises after all costs have been paid, he retains for himself (Ely and Hess, 1937). In the middle of twentieth Century, the first economist, to focus on the role of entrepreneurship in economic development through innovations was Joseph A. Schumpeter. In his words, “The function of the entrepreneur is to reform or revolutionize the patter on of production by exploiting an invention or, more generally, an untried technological method of producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or new outlet for products, by organizing a new industry (Schumpeter, 1972). 1.4 Current Scenario of Entrepreneurship in IndiaThe growth and success of entrepreneurship, which denotes a merger of ideas, initiatives and opportunities depends, upon the facilitating and encouraging environment. The success of entrepreneurial endeavors has a significant impact on the economy of any country. It helps in fulfilling individual aspirations and achieving objectives like financial gains, self-fulfillment and social identification. We, at
India, are living in an epoch of entrepreneurial development, where the entrepreneurship is being promoted by education Institutions, government, society and other corporate bodies. The entrepreneurship development scenario in India has intensified in recent times, particularly with the rise in knowledge-intensive services. The number of budding young entrepreneurs, who do not have prior entrepreneurial experience, has been rising constantly. Easy access to finance and other institutional support to ‘techno-preneurs’ have helped improve the climate for entrepreneurship in India. In the Indian context, the more entrepreneurial developmental activities are confined to Micro, Small and Medium Enterprises (MSME) sector, which is often termed as the ‘engine of growth’. It is considered as the most dynamic and vibrant sector of Indian economy as it provides large number of employment to rural as well as urban segment. The MSME sector, which is growing exponentially, contributes 37.54 percent to National GDP, 45 percent to total industrial production and 40 percent to total exports. Manufacturing segment within the MSME contributes to 7.09 percent of GDP. MSMEs also contribute to 30.50 percent of services (MSME Report, 2012). The MSMEs of India are being referred to as the cradle for the “Make in India” vision. These are compared with a nursery where existing small businesses, properly nurtured, have the potential to become world renowned tomorrow. The larger players amongst the MSMEs would also be in a unique position to become global players attracting allies with technology and funds from abroad. The contribution of MSMEs in generating employment can be summed up in the Table 1. Table 1: Performance of MSMEs Sr. No. Year Total Working Enterprises (in Lacs) Employment (in Lacs) 1 2001-02 105.21 249.33 2 2002-03 109.49 260.21 3 2003-04 113.95 271.42 4 2004-05 118.59 282.57 5 2005-06 123.42 294.91 6 2006-07 361.76 805.23 7 2007-08 377.36 842.00 8 2008-09 393.70 880.84 9 2009-10 410.80 921.79 10 2010-11 428.73 965.15
11 2011-12 447.66 1,011.80 12 2012-13 467.56 1,061.52 Source: MSME Annual Report, 2013-14, retrived from http://msme.gov.in/WriteReadData /Document File/ANNUALREPORT-MSME-2013-14P.pdf, accessed date March 31, 2015 A few recent surveys, undertaken by Goldman Sachs and Price Waterhouse Coopers (PWC), estimated that India has the potential to be among the world’s leading economies by 2050. Further, they pointed out that India’s economy has potential to gain extensively from the country’s distinguishing characteristics i.e. a democratic open society and a strong technological base (with capacity for leapfrogging), unique diversity, vibrant capital markets, an increasingly young population (50 percent of the population in India is 25 years and younger), a sizeable market of a large number of customers with vast unmet needs as well as an environment of full and free competition in the private sector. All these distinguished characteristics of India together make India a unique and fertile ground for the creation of wealth through the application of knowledge. Entrepreneurship and Innovation are the major tools for creating wealth throygh knowledge, supported primarily by the availability of skilled human resources, access to easy finance and the ability of the State to provide an enabling and encouraging environment. A recent survey report by Amway India and Indices Analytics (2014), which aimed to showcase about the future readiness of India in context of entrepreneurial development to facilitate the growth of self-employment in the country, has ranked various states of the country on a uniquely designed Future Entrepreneurial Readiness Index (Table 2).Table 2 Future Entrepreneurial Readiness Index State Indices of Sub-Parameters Future Entrepreneurial Readiness Index Enabling Environment Growth-oriented Economy Forward-looking Governance Gujarat 1 1 3 1 Delhi 2 2 2 2 Punjab 4 6 8 3 Himachal Pradesh 3 7 1 4 Karnataka 5 3 7 5 Kerala 6 5 10 6 Maharashtra 7 4 4 7
Tamil Nadu 8 8 6 8 Andhra Pradesh 10 12 12 9 Rajasthan 15 9 11 10 Madhya Pradesh 9 16 18 11 West Bengal 13 10 9 12 Haryana 12 13 13 13 Jharkhand 11 18 15 14 Uttar Pradesh 14 17 17 15 Uttarakhand 16 14 16 16 Bihar 17 11 14 17 Chhattisgarh 18 15 5 18 Assam 19 20 20 19 Odisha 20 19 19 20 Source: India Entrepreneurship Report, 2014 (by Amway and Indicus Analytics), retrieved from www.amwayentrepreneurshipreport.com Various states in India have been ranked based on three parameters; enabling environment, a growth oriented economy and forward-looking governance. Key findings suggest that most of the economically-developed states figure at the top of the list, based on providing an enabling environment and a growth oriented economy. Himachal Pradesh and Chhattisgarh, along with Gujarat and Delhi, are at the top in terms of forward-looking governance. States like Assam, Odisha, Bihar, Jharkhand, Chhattisgarh, along with Uttar Pradesh and Uttarakhand, again lag behind and figure at the bottom of the list. 1.5 Entrepreneur and Entrepreneurship: Conceptual Framework 1.5.1 Definition of Entrepreneur and Entrepreneurship Entrepreneur: The word entrepreneur finds its origin in a French word “entreprendre”, which means "to undertake." During early 16thcentury, the term was used for the persons engaged in military expeditions. In the 17thcentury, it was extended to cover construction and civil engineering works. The term was used in context of business and economic activities only in the 18thcentury. Richard Cantillon, a French Banker, is credited for the use of the word ‘Entrepreneur’ for the first time to mean a person who bears uncertainty and risk. According to Richard Cantillon, “An agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at an uncertain price in future”. An entrepreneur is the one who always searches for change, responds to it and exploits it as an opportunity. Peter F. Drucker
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